The Toronto stock market found little motivation to advance Friday as investors digested a mixed bag of U.S. earnings and awaited the results of a stress test on European banks.
The S&P/TSX composite index was ahead 13.20 points to 11,681.87 after key U.S. companies like Microsoft Corp. and Ford Motor Co. showed stronger results while Amazon.com underwhelmed.
The Canadian dollar was at 96.27 cents US, up 0.05 of a cent.
European regulators are scheduled to release results of so-called “stress tests” on banks, which are designed to predict whether banks could survive a downturn in the economy. The tests could provide insight into whether the growing debt of some European countries is having an impact on financial firms.
Statistics Canada said that Canada’s inflation dropped to the lowest level in eight months in June, as lower gasoline, clothing and footwear prices combined to push the annual rate down to one per cent. It was the second month in a row that the agency reported its consumer price index had dropped by four-tenths of a point.
“The economy is recovering but ... the unemployment rate is high, there’s still unused buildings and equipment so there’s some underlying pressure on inflation to head lower,” said John Johnston, chief strategist of The Harbour Group at RBC Dominion Securities.
“I think we shouldn’t be surprised if (the inflation rate) stays below the two per cent mark for awhile longer.”
Magna International (TSX:MG.A) shareholders approved a controversial plan to pay Frank Stronach about $1 billion in cash, shares and other incentives to give up his family’s voting control of the company. Subordinate A shares of the company were up $1.07 to $77.81.
The Toronto energy sector slipped 0.1 per cent as the September crude contract on the New York Mercantile Exchange tumbled 28 cents to US$79.02 a barrel. Shares in Suncor Energy Inc. (TSX:SU) dropped 20 cents to C$33.21.
Gold shares added 0.9 per cent as the August bullion contract fell $4.90 to US$1,190.70 an ounce. Stock in Barrick Gold Corp. (TSX:ABX) added four cents to C$44.
The TSX Venture Exchange was up 3.7 points to 1,392.12.
Microsoft Corp., American Express Co. and Ford Motor Co. all reported earnings that topped forecasts. More importantly, their results showed that businesses and consumers are increasing their spending as the economy recovers.
American Express said customers are spending close to pre-recession levels, a sign that shoppers are gaining some confidence in their personal finances. Ford’s sales jumped 28 per cent in first half of the year, nearly double the pace of the industry.
Their earnings added to a string of results over the past couple of days that helped push markets higher, with both the TSX and Dow up more than 200 points Thursday.
On Friday, both sides of the border wavered on giving back some of those gains.
The Dow Jones industrial average lifted 28 points to 10,350. The Nasdaq composite index off two points at 2,244 while the S&P 500 index was flat at 1,094.
Among the earnings disappointments, was Kimberly-Clark Corp., the maker of Kleenex tissues and Huggies diapers. It cut revenue forecasts for the year as second-quarter revenue fell short of expectations.
Amazon.com Inc. missed profit forecasts when it reported after the market closed Thursday. The online retailer’s expenses jumped sharply.
In Canadian earnings, Celestica Inc. (TSX:CLS) slipped to a small $6.1 million net loss in the second quarter, reversing a year-earlier profit. Revenue was $1.59 billion and its shares slipped 31 cents to $9.10.
Harry Winston Diamond Corp. (TSX:HW) has agreed to pay US$220 million in shares, cash and debt for nine per cent of the Diavik mining venture. The transaction with Kinross Gold Corp. (TSX:K) will boost Harry Winston’s holding in the mine to 40 per cent. Its shares were down $1.45 to $13.10.
European markets were mixed ahead of the stress test results, which will come out after markets there close for the weekend. German shares soared, however, after a closely watched business climate index rose unexpectedly for the fifth straight month.
Germany’s DAX index rose 2.9 per cent, Britain’s FTSE 100 dipped 0.2 per cent, and France’s CAC-40 was up 0.1 per cent. Japan’s Nikkei stock average jumped 2.3 per cent.
